Statement by IMF Staff Mission to NamibiaPress Release No. 11/427
November 22, 2011
An International Monetary Fund (IMF) mission visited Namibia from November 9-22, 2011 to conduct discussions for the annual Article IV Consultation. The IMF team met with Prime Minister Hon. Nahas Angula, Minister of Finance Hon. Saara Kuugongelwa-Amadhila, Parliamentarians, senior officials in government departments and the Bank of Namibia, and representatives of the private sector, non-government organizations, trade unions, and development partners.
At the conclusion of the mission, Mr. Maitland MacFarlan—the IMF Mission Chief for Namibia—issued the following statement:
“Following strong growth in 2010, activity in the Namibian economy appears somewhat more subdued in 2011. Growth may reach around 3½ to 4 percent this year, held down in part by some difficulties in the mining sector earlier in the year and the weak global outlook. Although global uncertainties may continue for some time, several promising investment opportunities in the domestic economy should help sustain growth of at least 4 to 5 percent over the medium term. We expect inflation to remain well within single-digit rates, in line with the exchange rate peg to the rand.
“Policy discussions during the mission focused on measures to promote stronger and broader-based growth in output and employment, while maintaining Namibia’s good track record of prudent macroeconomic policies. The IMF team fully understands and shares the authorities’ concerns about persistently high rates of unemployment, poverty, and inequality in the economy, and agrees with the need for innovative policy measures to address these problems. Current policy efforts in that regard come largely through the Targeted Intervention Program for Employment and Economic Growth (TIPEEG). In the mission’s view, TIPEEG includes potentially useful measures to reduce supply bottlenecks and enhance growth—for example, through addressing infrastructure needs in education, health, sanitation, energy, and transport. At the same time, the mission feels that policy efforts should strengthen further the climate for private investment, business development, and job creation. The IMF staff was pleased to hear from the authorities that wider-ranging structural reforms will be part of the discussions surrounding the fourth National Development Plan (NDP4).
“The mission also discussed with the authorities the implications of the current expansionary stance of fiscal policy on the overall macroeconomic situation and outlook. The staff notes that the fiscal expansion planned under the current medium-term expenditure framework (MTEF) would raise public debt from 16 percent of GDP at the end of FY2010/11 to around 30 percent of GDP in FY2013/14, and debt would continue rising beyond that point unless fiscal deficits are significantly scaled back over the medium term. The mission is also concerned that ongoing fiscal expansion could put pressure on the country’s external position by increasing imports, drawing down official reserves, and placing pressure on the prices on non-tradable goods, which would hurt competitiveness. While the recent Eurobond issue and robust revenues from the SACU revenue pool should help the budget and the external position of the economy over the next year or two, significant uncertainties cloud the outlook. The global economy is now, and could remain for some time, in a fragile condition. There is also the possibility of a longer-term decline in SACU revenues, which currently provide around one quarter of total budget revenues. Given these concerns, sound fiscal buffers need to be in place to support the economy in the face of large shocks. The authorities’ signals to the mission that they remain committed to a prudent fiscal stance and to taking the necessary measures to contain public debt are therefore encouraging.
“The financial sector appears to be sound and profitable. Given the current volatility in international financial markets, however, the authorities need to maintain their vigilance in ensuring that banks have sufficient capacity to absorb large shocks, while taking pre-emptive measures if necessary to contain domestic vulnerabilities. The mission also endorses the authorities’ efforts to enhance the regulation and supervision of non-bank financial institutions.
“Drawing on its discussions during the mission, the staff will prepare a report for the IMF Executive Board on economic and policy developments in Namibia. The Board is expected to consider this report in February 2012.
“Finally, the mission wishes to thank the authorities for their warm hospitality and for the spirit of cooperation and collegiality that surrounded all the discussions.”